Distribution of Wine in Vietnam

Practical Guide

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Vietnam: a booming wine market with a sophisticated touch

Vietnam has enjoyed tremendous, steady GDP growth in recent years, attracting more and more expats that work primarily in the thriving manufacturing and service industries and allowing an ever larger chunk of its young, dynamic 97+ million population to afford more and more sophisticated products, indulge in more westernised customs, while retaining a strong sense of traditions, including eating and drinking out. A former French colony and open to sea and land trades, Vietnam indeed displays a lot of charme.

The imported wine market in Vietnam is now more exciting than ever with quality and quantity constantly increasing by year. The Vietnamese appear to have beaten the Japanese and Indian in such an unfairly matched game of alcohol consumption growth rate where the rate in Vietnam is twice the runner-up.

Vietnamese drinkers knocked back 4.2 billion litres of alcohol in 2019, an increase of 90% over ten years, making the Country the leading market for alcohol in Southeast Asia, and very soon Asia. Therefore it is inevitable for global products to pour into this young, potential market. Revenues in the wine segment amount at the time of writing (October 2020) to USD243 million in 2020. The market is expected to grow annually by 8.6%.

Economists see Vietnamese drinkers’ growing taste for wine as evidence of the creeping westernisation of the Country. In 2018, the total import turnover of wine reached USD53.2 million, an increase of 85% compared to 2010. According to statistics of the Vietnam Alcohol and Beverage Association, there are currently only fifteen companies in Vietnam producing and bottling wine with an annual output of about 12-13 million litres.

The General Statistics Office announced in the latest report that the growth rate of imported wine has increased by about 25% per year since 2004. Between 2017 and 2021, the total food and beverage sales are expected to grow at a compound annual average rate of 11.3%. From 2010 up until the present, there has been a steady increase in wine imports to Vietnam with an annual rate of 10%. The popular division of wine in Vietnam is based on the Country of origin, with favourites being the “usual suspects”, namely France, the USA, Chile, Italy and Australia.

French brands ranked first in the wine supplies in Vietnam, holding 35% of the wine market share, followed by the Chilean at 25%. Italy, Spain and the USA, are the next Countries of origin on the list, as the number of wines coming from these Countries keeps increasing every year. In 2019, the growth rate of imports of French and Italian wines to Vietnam was up 20%. Vietnam is being targeted as a massive potential market in Asia by French and Italian wine suppliers, since, as mentioned earlier, its annual growth rate remain steadily at 10%.

How to protect your trademark in Vietnam

Unfortunately, Vietnam has earned a notorious reputation for the distribution of fake goods, including spirits, cigarettes, perfumes and wine. It is not very hard to spot business owner exhibiting counterfeits on their very own display on crowded streets in Hanoi or Ho Chi Minh City.

Trademark registration is not a mandatory requirement for wine to be traded in Vietnam. However, in a situation of rampant counterfeits, smuggled alcohol and lack of deep and wide culture about this product, getting your name, logo and mark registered is the most effective way to protect your assets.

Since Vietnam is a signatory to the Madrid Agreement concerning the International Registration of Marks 1939 and the Protocol Relating to the Madrid Agreement  (collectively known as the “Madrid system”), to obtain protection of a trademark in Vietnam, trademark holders may file through either the national route or the Madrid system.

A common trademark registration process for alcoholic beverages follows the ordinary path pursued by trademark applicants in Vietnam, which consists of the following steps:

  • formality examination: the National Office of Intellectual Property (NOIP) performs an examination to check that the proposed registration complies with its formal requirements and that it does not fall foul of the absolute grounds to refuse applications. The NOIP will also search for earlier registered trademarks that conflict with the application, which the applicant will then have an opportunity to argue against. The application is processed in approximately one month from filing date before NOIP issues its decision on formality acceptance of application;
  • application publication: assuming the application gets through the examination phase, it will then be published on the IP Gazette in a period of two months counting from the date of decision for the purpose of possible opposition by third parties;
  • substantive examination:  absolute refusal and relative refusal examination are simultaneously conducted by the NOIP in 9 months commencing from the date of publication on the Gazette;
  • statement of grant of protection: official fee for grant of certificate indicated therein shall be paid by the applicant within thirty days and it normally takes thirty days to receive the original certificate.

If the application is successful, the trademark registration will last for an initial period of ten years, following which it can be renewed for additional periods of ten years each, indefinitely. However, if a trademark is not put to use in the first five years of its registration or for a continuous period of five years during its registration, then a third party may seek to have the registration revoked for non-use.

Wine Labelling regulations in Vietnam

All imported wine must comply with labelling regulations upon release.

Some mandatory information (such as product name and alcohol content) must be shown in Vietnamese on the label of wine products, according to the Decree No. 43/2017/NĐ-CP of 14 April 2017, on labelling of goods.

For imported wines, in addition to the manufacturer’s main label, the importer shall carry out a declaration of the quality of the product and apply a sub-label of the product. All goods sold on the market must have an alcohol stamp and an additional label. Compulsory contents on the imported alcohol sub-label include:

  • quantity;
  • ethanol content;
  • expiry date (if any);
  • instructions for storage;
  • warnings (if any);
  • lot identification number (if any).

The wine market regulations in Vietnam

Wine is part of the list of special imports into Vietnam. To import wine, it is necessary to go through a process of import and export customs procedures and documents are quite complicated to fill in and produce. Importing such items requires lots of specialised sub-licenses, so it is an activity that is strictly conducted by specialists from the very early licensing stages to the post-inspection process to the goods circulation phase. The main source of law in this regard is Article 20 of the Government’s Decree no. 105/2017/NĐ-CP dated 14 September 2017 on wine production and trading, which states as follows:

Article 20. Importing wine

1. Imported wine comprise bottled finished wine for instant consumption, and semi-finished wine for producing finished wine in Vietnam.

2. Imported wine must have legal import documents as prescribed by current regulations, and be conformable with the regulations on putting stamps on imported wine as prescribed in Article 15 of this Decree.

3. Imported wine must be labelled as prescribed in Article 14 of this Decree and relevant laws.

4. Only enterprises having licenses for wine distribution may directly import wine, and must be responsible for the safety and quality of the imported wine. Enterprises importing semi-finished wine and additives for producing finished wine may only sell it to enterprises licensed to produce wine.

5. Enterprises having license for mass production of wine may directly import or authorise other enterprises to import semi-finished wine and additives for producing finished wine.

6. Imported wine must be registered for the Declaration of Conformity at the competent agency of Vietnam before the import, and each consignment must be issued with the written certification of food eligible for being imported as prescribed by law.

7. Wine is only imported to Vietnam through international border checkpoints. Apart from the papers presented to the customs when following the import procedure as prescribed, the importer must present the written appointment or authorisation as an official distributor or importer of the producer or trader, or the agent contract of the producer or trader of those articles.

Thus, in order to be allowed to import alcohol, enterprises must meet the above conditions.

In addition, Vietnam imposes legally binding regulations on alcohol advertising, product placement, sponsorship and sales promotion, but health warning labels on alcohol advertisements and containers are not required. Furthermore, alcohol cannot be sold, whether on or off-premise, to minors.

Upon completion of import procedures, distributors are required to have a liquor resell licence. Foreign distributors can now conduct such activities in Vietnam by establishing a (wholly) foreign owned Vietnamese company which must obtain a so-called trading licence, before kicking off retail operations.

Customs clearance, duties and taxation of wine in Vietnam

Imports in Vietnam are regulated by the Customs Law (2015) and other notices and decrees issued by the Vietnamese Government. Imported wine must be inspected before it can be cleared at the customs, in compliance with the National Technical Regulation on Food Safety for Alcoholic Beverages (QCVN:2010/BYT).

Core elements of inspection naturally include quality, specifications, quantity, and alcohol volume.

Besides, wine import firms in Vietnam are required to submit their document portfolio to the import authorities, including the import business code and the certificates of company registration. Import declarations must be submitted in advance or within thirty days of arrival through electronic data processing system of the Vietnam Automated Cargo and Port Consolidated System/Vietnam Customs Information System (VNACCS/VCIS).

Other supporting documents, including commercial invoices, inspection reports, value statements and certificates of origin may also be required to be submitted.

Vietnam adopts the Harmonized System (HS) for commodities, and most import goods are subject to import tariffs. To determine if a certain wine is subject to tax exemption, it is advisable to refer to Article 107 about cases under tax-exempt consideration, and Article 108 about the dossier for tax-exempt consideration under Circular 38/2015/TT-BTC of 25 March 2015, as well as to the various free trade agreements to which Vietnam is a signatory.
The code for the wine is 22042111.
The corresponding tax rate for this HS code is as follows:

  • import tax: 50%;
  • special consumption tax (SCT): 30%;
  • value added tax (VAT): 10%.

Evidently, taxes make imported wines quite expensive for the end-consumers to buy, but Vietnam has lowered its tariff restrictions on importing wine after it joined the World Trade Organization (WTO) and the Association of Southeast Asian Nations (ASEAN). To improve long-term relationships with its stable trading partners, Vietnam has issued less strict import tariffs for wine exporters coming from Australia and New Zealand and more recently with EU Member States, thanks to the EU-Vietnam Free Trade Agreement (“EVFTA”), in force since August 2020. The ASEAN-Australia-New Zealand Free Trade Area (“AANZFTA”) is the agreement that in turn affects, among others, the wine trade and its import tariffs between Vietnam and Australia and New Zealand. The lowered tariff as well as non-tariff barriers between Vietnam and Australia and New Zealand, as well as Vietnam and the EU, present big opportunities for greater exposure to imported wine and wine products.

Contracts for the distribution of wine in Vietnam

Vietnam is a Civil Law jurisdiction (hence not too distant in principle from legal standards one can find in Countries like France or Italy), a Socialist Republic with at the same time strong customary traditions that form part of the legal practice, somehow similarly to the People’s Republic of China. Whilst laws are relatively gaunt and can easily be found available in English, complications arise with their interpretation through a myriad or circulars and regulations, a very formalistic approach adopted by the courts and the evident toughness of the Vietnamese language.

Therefore, having a properly drafted agreement in place is essential, so that the will of the parties is fixed and compliant with the laws and regulations and can be interpreted without too many headaches in case of dispute.

Vietnam does not have a specific law on commercial agency, unlike Member States of the European Union, where many producers, accustomed to such model, come from. The parties can indeed regulate their business according to a freely negotiated contract, whose content is similar to that of the commercial agency in the EU, but they must do so through a valid contract and bear in mind that such type of contract is mainly regulated by the Law on Commerce No. 36/2005/QH11. The Commercial Law defines “commercial agency” as a commercial activity whereby the principal and the agent agree for the agent to, on behalf of the principal, but in its own name, conduct the sale and purchase of goods or provide services to third parties (customers). The agent must be a Vietnamese legal entity.

The Commercial Law, together with the Civil Code 2015, is the main source of legislation on distribution contracts between a supplier (typically the wine producer) and a distributor which accords rights to the distributor to resell the supplier’s goods or services.

Whilst not mandatory, it is essential that both an commercial agency agreement and distribution agreement be regulated by a proper written agreement, which addresses, inter alia, and mutatis mutandis, the following clauses:

  • licence: the distributor must hold valid licences (see “Make sure you play by the book”) to act in such capacity;
  • exclusivity: it should be noted that Vietnamese agents may enter into agreements with various, sometimes competing, principals, unless this is expressly prohibited by the contract;
  • territory: regardless of exclusivity, Vietnam is populous and relatively large Country, long and narrow, with big cities, faraway from each other, which may entail having different agents / distributors throughout it;
  • products that the producer supplies the agent / distributor with;
  • pricing, which may be determined by the producer at its discretion, and payment terms, which could include conversion rates of the Vietnamese Dong, as well as penalties for delays;
  • distributor’s obligations (to name but a few, inventory, minimum quantities, after-sale services) and supplier’s obligations (e.g. provide technical support and marketing material);
  • intellectual property rights: on top of safeguarding the producer’s, the agreement may also set out the distributor’s scope of use of the supplier’s trademarks and trade names;
  • governing law and jurisdiction, in case of dispute: going to court is never a pleasant exercise and in Vietnam even less so, hence a valid arbitral clause should be drafted, bearing in mind that Vietnam is both a signatory to the New York Convention on the recognition of foreign arbitral awards and home to a few valid international arbitration centres scattered throughout its territory, like the Vietnam International Arbitration Centre.

In recent years, against initial skeptical expectations, e-commerce and ancillary activities (delivery, in-app purchases, gamification, tokenisation etc.) have literally boomed and foreign wine producers should take this consumer behaviour into account when devising their strategies and agreements for Vietnam.

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